At the beginning of every year, many of our clients begin to ask about rent increases for the calendar year, and in 2013, it is no different. My philosophy on rent increases is this: if the market can support it, always increase your rent when you have tenant turnover. Periods of tenant turnover are good opportunities to do some small improvements to your rental property. You can take care of items that do not cost much but add value. Giving your place a bit of a face lift will make it more appealing to prospective residents and will allow you to charge a higher rent.
Increasing rent on a current tenant is a little different. You need to take into consideration the potential cost of vacancy and your turnover expenses. Compare that to what you might gain or lose if you raise the rent too much. A general rule of thumb to remember in today’s market is that it’s always better to maintain a good tenant who pays rent on time and takes care of the property. Keeping that tenant in place is always better than increasing the rent above current market rates, which could leave you in a position where you’re only hoping to find another good tenant relatively quickly.
Make sure you conduct a market survey to see what rental rates are in your property’s location. If you have a current tenant paying $1,850 per month and a quick survey shows properties with similar size, number of rooms and condition are renting for $1875 – $1,895, you should probably consider leaving the rent where it is or a very minimal increase and a renewed lease term. A high quality tenant who is paying slightly less than current market rents will tend to stay longer, which means continuity of cash flow for the owner.
At Walters Home Management, we evaluate rent values for our clients on a property by property basis. We make our recommendations for rent increases based on the current market rents, how long the tenant has been in the property and when the last rent increase occurred. Taking all of these factors into consideration will give you a clearer path on what the best decision is for your property. If you have any questions about rent or how to decide whether to raise your rent, please contact us at Walters Home Management.